Help at hand for struggling investors

Help at hand for struggling investors

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There can be little doubt that COVID-19 has had an enormous impact on strata owner occupiers and investors.

Job losses and reduced working hours have seen tenants wanting to negotiate lower rents. This has resulted in some financially strapped tenants moving to shared accommodation to save on costs while others have let their tenancies go entirely in favour of moving back in with parents or other loved ones.

International border closures have meant only limited numbers of international students, migrants and international tourists are able to enter the country, resulting in an increase in available tenancies.

Melbourne investors appear to be the hardest hit with the estimated number of vacant rentals in Melbourne rising an incredible 157.3% year-on-year, at just under 26,500 empty rentals.

As if that weren’t enough, many strata investors and owners across the country must also contend with an increase in the number of Airbnb rentals being converting to long-term rentals, adding to an already burgeoning surplus of strata properties.

Even for those who have survived the COVID-19 storm relatively intact, state governments are encouraging landlords and tenants to negotiate on rent reductions or deferrals when their tenant’s capacity to pay their full rental obligations have been affected by the virus.

A raft of measures aimed at making life easier for tenants – including a restriction on landlords evicting tenants who are financially disadvantaged by COVID-19, and allowing tenants financially disadvantaged by COVID-19 to terminate a tenancy agreement where a landlord will not negotiate, or where it is necessary to avoid financial hardship, were due to end on 15 October last year.

Many state governments have now extended these measures until at least 26 March while the Queensland Government has pushed some COVID-19 arrangements for residential tenancies out to 30 April, 2021.

All of which means there may be more tough times ahead for strata investors and those who derive an income from their strata investment.

While no one can be sure when the good times will return, there remains several options for strata investors feeling the pinch.

Although laws vary between states, NSW Fair Trading says all landlords in the state can apply to the NSW Civil and Administrative Tribunal at any time to take possession of a property if they are suffering undue hardship.

All tenants not impacted by COVID-19 are expected to continue paying all rent and charges in full.

In many states, including South Australia and Victoria, land tax relief is available for eligible residential landlords in response to COVID-19.

In South Australia, the relief is available for residential and non-residential landlords over two periods.

The initial period of land tax reduction was based on rent relief the landlord has provided to tenants impacted by COVID-19 or rent the landlord has forgone between 30 March 2020 and 30 October 2020 (Period 1).

The South Australian government has since extended applications for relief for Period 1 to 30 April 2021.

In Victoria eligible applicants can also defer paying their remaining 2021 land tax, as well as any land tax previously deferred as part of the 2020 relief, up to 30 November 2021.

Finally, landlords in any state facing financial difficulties are encouraged to:

  • ask their financial institutions for a temporary mortgage freeze or reduced repayments if their tenants are struggling to pay the rent
  • check if their insurance covers rental reductions or default
  • check eligibility for land tax reductions.

Landlords who are struggling financially may also like to consider using their offset account or a redraw facility to free up additional cash.

Likewise, if you are paying more than the minimum required repayment on your mortgage, it may be worth speaking to your lender about reducing your repayments to the minimum repayment until you are able to get back on your feet, or even switching to an interest-only loan.

Those who aren’t satisfied with the response from their financial institution have the option of accessing their institution’s internal dispute resolution service.

If a landlord is not satisfied with the outcome of that process, they also have the option of lodging a complaint with the Australian Financial Complaints Authority.

It may also be worth contacting an agency that offers free financial advice, such as the National Debt Helpline.

To discuss your property’s strata management needs or receive a FREE management proposal contact our friendly team. We also offer more helpful resources and community living news in our FREE newsletter.

The information provided is a general guide only and is not intended as a substitute for legal advice. The company disclaims all responsibility and liability for any expenses, losses, damages, and costs which might be incurred as a result of the information provided by the company.

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